In a pre-election boost for Prime Minister Rishi Sunak, national output surpasses analysts’ expectations.
ADVERTISEMENTThe UK economy grew by 0.6% in the first three months of this year, according to figures released by the Office for National Statistics on Friday.
This exceeds forecasts of 0.4% given by both the Bank of England (BoE) and economists polled by Reuters.
The GDP result also brings the UK out of last year’s shallow recession, marked by two consecutive quarters of declining output.
Last year, the economy contracted by 0.1% in the third quarter and 0.3% in the fourth quarter.
GDP on a monthly basis grew by 0.3% in January, an upwardly-revised 0.2% in February, and 0.4% in March.
Friday’s data will come as a relief to Conservative Prime Minister Rishi Sunak and Chancellor Jeremy Hunt ahead of an expected election this year.
“There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic,” said Hunt on Monday.
Prime Minister Sunak wrote on X: “The economy has turned a corner. Today’s news proves that. We know things are still tough for many people, but the plan is working, and we must stick to it.”
The results come a day after the BoE decided to leave interest rates unchanged at a 16-year high of 5.25% for the sixth time in a row. Governor Andrew Bailey signalled that rates may be cut in the summer if inflation stays low.
The BoE also updated its growth forecasts for the UK yesterday, predicting a rise in GDP of 0.5% over 2024. This is up from 0.25% in its February forecast.
“The economy has made a turnaround,” Amy Knight, small business commentator and spokesperson for NerdWallet UK, told Euronews Business.
“However, inflation has been baked into the cost of doing business for so long now that even positive economic news may leave a bitter aftertaste for those who’ve spent the post-pandemic period watching their profits evaporate. It will take a generous cut in interest rates at the next Monetary Policy Committee (MPC) meeting to sweeten the current outlook for 2024 and beyond.”
Friday’s data comes after the Eurozone recorded 0.3% growth in the first quarter of the year, with the US announcing 0.4% growth.
Improved UK output was driven by a 0.7% increase in the services sector.
The production sector grew by 0.8%, while the construction sector fell by 0.9%.
